I attach three pieces concerning Israel and the European Union (and first a brief summary for those who don't have time to read the full articles):

1. "U.S. think tank urges EU to halt funding to PA" (AP, August 21, 2002). A U.S. think tank is asking the Bush administration to press for an independent investigation into whether EU monies are being misused to fund terrorism against Israeli civilans.

2. "Dialogue needed, before we turn into a leper state" (Ha'aretz, August 21, 2002). Israel's ambassador to the European Union warns Israeli prime minister Sharon not to ignore Europe. "Such neglect will cost us dearly in the future," he says. The ambassador states that Israel must "draw Europe into a serious, genuine dialogue, one which will deal not only with ongoing events, but also with deeper levels." The ambassador disagrees with Colin Powell's recent comment that anti-Semitic phenomena in Europe are "manifestations of repressed emotions, ones which were always present in Europe, but which were concealed in the aftermath of World War II."

3. "With unyielding faith" (By Thomas Kleine-Brockhoff, Die Zeit, August 15, 2002). This is a very long piece translated from the leading German newspaper "Die Zeit" August 15, 2002. It is a follow-up article to Die Zeit's in-depth analysis ("Arafat Bombs, Europe Pays" June 7, 2002) referred to in my previous dispatch, and further examines allegations that European government aid money is being used by the Palestinian Authority to help finance the murder of Israeli Jews.

FULL ARTICLES

HERITAGE FOUNDATION URGES EU TO HALT FUNDING TO PA

U.S. think tank urges EU to halt funding to PA
The Associated Press
August 21, 2002

The Heritage Foundation, a conservative private research group, is urging European leaders to stop funding the Palestine Authority in light of its "overwhelming anti-Israel bias" and allegations the aid funds Palestinian terror.

In a report, the foundation asked the Bush administration, which circumvents the Palestinian Authority in its assistance program, to press for an independent investigation into whether European Union funds are misused.

Direct aid to the authority, which is headed by Yasser Arafat, should be halted until elections are held and the leadership is changed, said a Heritage report prepared by Nile Gardiner, a visiting fellow in security policy.

The European Union gave the Palestinian Authority an estimated $3.36 billion between 1994 and 2000, and continue to give the Authority about $10 million a month.

Many European leaders have equated the terrorist actions of Palestinian militants with legitimate measures taken by the Israeli Defense Force, Gardiner said. "The Europeans apparently want to project power in a region where they believe their diplomatic and economic influence rival that of the United States," he said.

President George W. Bush in June said Palestinian leaders were helping terrorists rather than opposing them. He called for the ouster of Arafat and said the United States would assist in establishing a Palestinian state only if corruption was ended.

Three Palestinian Cabinet ministers appointed by Arafat held talks this month in Washington with senior administration officials at the White House, the State Department and the Central Intelligence Agency.

Gardiner said the Bush administration should advise the European Union that it will not waver in supporting the Prime Minister Ariel Sharon and that the EU should withdraw its support for "Arafat and his cronies and curb its anti-Israel rhetoric."

An international task force will meet in Paris on Thursday and Friday to consider ways to reform the Palestinian Authority.

American, Russian, European Union, United Nations, Norwegian and Japanese officials will attend, as well as officials from the World Bank and the International Monetary Fund.

Two American diplomats, David Satterfield and Elizabeth Cheney, left Washington on Tuesday to attend the talks. The talks could produce a new burst of assistance to the Palestinians.

“POLITICAL AND INTELLECTUAL GAP BETWEEN ISRAEL AND EUROPE IS WIDENING”

Dialogue needed, before we turn into a leper state
By Sharon Sadeh
Ha'aretz
August 21, 2002

Apart from a few visits to a limited number of capitals and preciously few calls to brief continental leaders, Prime Minister Ariel Sharon has not paid much attention to Europe. Nor do ministers in his government walk the extra mile to get close to Israel's largest trade partner. "Such neglect will cost us dearly in the future," warns Harry Kney-Tal, Israel's ambassador to the European Community.

Kney-Tal, 58, who held senior diplomatic posts in the U.S. and elsewhere as an Israeli diplomat, completes his term in Brussels in a few weeks. Preparing to return home, he's worried and frustrated. The political and intellectual gap between Israel and Europe is widening he says. Without corrective steps, Israel is liable to end up boycotted as a pariah state, like South Africa in the days of apartheid. As he sees it, Israel has done little, if anything, to forestall this eventuality.

European Union states, and Belgium in particular, have in recent years turned into trouble spots for Israeli diplomats. Anti-Semitic attacks against Jewish targets, coupled with vocal, strident support for the Palestinian Authority and vehement criticism of Israel's military activity – such trends, and others, appear to reflect a one-sided, hostile viewpoint. Tendentious, negative treatment of Israel in the media reinforces this impression. Commentators, particularly on Israel's right, often argued that Europeans criticize Israel in the name of lofty moral principles which veil what is little more than resurgent anti-Semitism. This view is backed by some U.S. officials.

A few months ago, U.S. Secretary of State Colin Powell was quoted saying that anti-Semitic phenomena in Europe are "manifestations of repressed emotions, ones which were always present in Europe, but which were concealed in the aftermath of World War II." Such views are superficial and one-sided, Kney-Tal believes. They lead to a faulty understanding of European Union dynamics and goals.

Kney-Tal adds that relations between Europe and Israel have also worsened because the EU leadership "recoils from information which contradicts its value systems and perceptions, some of which are based on stereotypes" regarding Israel, the dispute and the Middle East.

PERCEPTUAL GAP

A clear illustration of the perceptual gap between Israel and the EU involves the connection between Palestinian incitement and suicide attacks. "Both Israel and the Europeans denounce incitement," Kney-Tal explains. "But when it comes to the meaning of the phenomenon, the sides express differing interpretations. In Israel, a close link is made between the school texts, media reports, official statements, mosque sermons - and suicide attacks. In Europe, this interpretation is totally rejected. We recognize that there is terror, the Europeans tell us, but their reference is to terror attacks like those of the Catholic underground in Northern Ireland, or the Basque underground in Spain: these were aimed mostly at political figures or symbols of government, and were not designed to kill indiscriminately, as happens in our case." Often terrorists in Western Europe give advance warning about where explosives have been put, in order to limit casualties.

"Up to September 11," Kney-Tal says, "the Europeans would use the term 'cycle of violence' in the Israeli-Palestinian context. In their view, it wasn't clear which side initiated violence; nor was this issue of who started it very important. There is an attack and then a response, which inevitably leads to another attack and so on. They didn't attribute special import to suicide attacks; they viewed them as a local Israeli problem.

"We, of course, saw things differently: there is a process of incitement, which causes terror attacks and, then, escalation of violence. There were also differences of opinion regarding incitement in Palestinian schoolbooks. We warned about the phenomenon; they promised to look into it. Their findings differed from ours. They wanted to show that incitement in Palestinian school texts was disappearing. We said: take a closer look, that's not the case. But they're not conscious of nuances which are very sensitive issues for us. That's not because they are anti-Israel; it's because they relate to the issue on an emotional plane which differs entirely from our own."

The Europeans, says Kney-Tal, after having reached a rational decision in favor of reconciliation, and having lived for six decades under peace and economic prosperity, have a problem in grasping Israel's difficult plight. "After the Second World War, Europe decided to abandon the use of force as a means to resolve disputes, and to set up the European Union, which operates on the basis of shared interests... What drives them [the Europeans] crazy is states in the world like the U.S. and Israel, which don't recognize purely rational-legal rules of the game, and which believe that there are situations which require them to exercise their right of self-defense by resorting to the use of massive military force. The Europeans don't believe in a zero-sum game; instead, they try to cultivate interests shared by all the sides, while trying to create the widest possible common denominator."

After two devastating world wars, Kney-Tal says, Europe doesn't want to believe that there are situations in which arrangements can't be forged by negotiations. It has succumbed to cognitive dissonance: were the Europeans to indicate agreement with the claim that the Palestinian Authority uses incitement, and that such incitement leads to irrational actions such as suicide attacks, such agreement would contradict the manner in which the situation has been analyzed up to now, and the way they have wanted to view matters.

"They simply cannot accept this turn of logic – incitement leads to suicide attacks. Such acceptance would entail rejection of the creature they've created, the Palestinian Authority, an entity established largely through European assistance and funding," Kney-Tal says.

The European Union is proud that it enabled the Palestinian Authority to survive in recent years, in a period when Israel enforced severe economic sanctions against it.

"Their claim is that they haven't done so because they are especially altruistic, but instead because they've understood – unlike Israel, and now unlike the U.S – that the legal Palestinian framework needs to be preserved in the long term, and that this system is headed by a leader, Arafat, who was elected legitimately, in order to guarantee negotiations, and progress in the diplomatic process," Kney-Tal says. "In other words, the Europeans are basically telling us we know better than you, because we're not so involved emotionally in this story, and we can look at the situation in a sober, detached, neutral way, relating to the two sides equally. Thus, they are extremely critical of the American position, which is so supportive of Sharon and Israel's government."

"The dispute with Europe," explains Kney-Tal, "worsened in tandem with the degenerating crisis with the Palestinians... For us, it became clear that the rational negotiation framework, which was constructed in the Oslo process and which featured gradual progress for both sides toward the establishment of two states for two peoples, went awry, and collapsed. The Europeans have a different view."

The EU has refused, and continues to refuse, to play any part in a process that might lead to a collapse of the Palestinian side. Such a process, the EU believes, would paralyze the diplomatic process, and create a situation of absolute terror and anarchy.

"Such a state of chaos is the exact opposite of what Europe wants right now," says Kney-Tal. "Europe assumes that if the Palestinians will, in the end, have a state, then they would be involved in building their nation; and that is why the PA has to be preserved at all costs, if the Palestinians are to have such a role. For years, they [the Europeans] were apathetic both to our appeals calling for reforms in the PA, and to our claims that incitement leads to attacks and that EU assistance allows Arafat to divert money to terror. The challenge, as they see it, is to prove that these claims are unfounded, and that we are basically exploiting such charges manipulatively in order to force them to sever their assistance, and turn their backs on the PA."

For the Europeans, "the rational negotiating process comes before everything else. It has to continue, come what may, because once we make it to the end of the process, and a solution is forged, then a new era of healing will arise, and the time will be ripe for really dealing with incitement. In other words, [Europe's view] is that fundamental, root problems must be dealt with first, and then their symptoms can be addressed. And, as they see it, the root cause of the dispute is the occupation. Take care of the occupation, they say, finish it, and then one of two things will happen: either there will be quiet, or we will understand that there's no quiet because the Palestinians have wider goals. We say the opposite: We can't deal with the root problems without first taking care of their symptoms. In this respect, the difference [in interpretations] is vast."

Europe remained adamant, Kney-Tal explains, even when the Camp David and Taba talks broke down. "This was a rational process; the sides sat around a negotiating table. But then it became clear that this [the talks] doesn't work; but they refused to accept this could be so. In a way, they were in a state of denial. At first, they had to be satisfied with versions offered by Ehud Barak and Shlomo Ben-Ami. A year later, a counter version propounded by former Clinton adviser Robert Malley came out, refuting Israel's claims. The French loved it. His articles were translated instantly and circulated in the media. They accorded with the world view which held that there are two sides, and responsibility for the failure rests equally with both. Once again, this European view reflected a rationalist approach to conflict resolution."

As Kney-Tal sees it, those in Israel who present themselves as belonging to the peace camp have helped the Europeans abide by their refusal to draw a logical connection between incitement, funding and suicide terror attacks. These Israelis say claims about incitement leading to terror belong to the right-wing, which wants to topple the PA. The European Union relates to the peace camp as a potential partner for the continuation of dialogue with the Palestinians, Kney-Tal says.

ATTITUDE CHANGE

During the last year, after the September 11 attacks in the U.S. and the steep rise in the number of suicide attacks in Israel, the European Union's tone and approach have changed. "There has been some progress in the EU's position," Kney-Tal says. "They are talking now explicitly about taking action against Palestinian terror...They are more balanced, and even express solidarity with Israel. The list of terror organizations deemed illegal by the EU has grown, and now includes Hamas' military wing, and Islamic Jihad. Recently, they added eight Palestinian and Arab organizations, including the Al-Aqsa Martyrs Brigade. Of course, in order to maintain balance, they added the [Jewish] Kahane Hai and Kach groups. They also toughened up terms for the conferral of money to the Palestinians, and tightened supervision of this funding."

Kney-Tal is worried about a new generation of Western European leaders who grew up on on the Palestinian-Arab narrative. "That narrative, which is reinforced by Israeli or former Israeli researchers, has nearly totally taken over the academic, polticial and media discussion of the issues," he says. "It is appropriate to the popular world view in Europe nowadays, which is pacifist and post-modernist, full of guilt toward the former colonies and full of sympathy for oppressed nations demanding self-determnation. It also serves electoral interests as well as the traditional interests of realpolitik, which takes up a large part of EU policy.

At the same time, he fears, there is a an accelerating process of delegitimization of Israel, which is gradually being perceived – though at this stage only in intellectual circles, but the trend will grow – as a crude, brutal, and racist country that tramples on civil rights.

"I'm worried about the fact that Israel and Europe have not been able to build a framework which enables and facilitates Jewish-Christian dialogue," says Kney-Tal. "The Europeans are building frameworks for deep and profound discussion only with those Israelis whose viewpoints are close to their own, with Israelis who justify the EU line and thereby provide moral validity to the European position. They [Europeans] understand neither Israel's reality, nor Israel's rich cultural diversity.

"The second problem is the absence of an intellectual dialogue. Academics in Israel are keeping mum, and I'm worried that the intellectual elite [in Israel] still hasn't grasped that its in the same boat: should Israel be engulfed by the waves, it, too, will go down. I remain flabbergasted that some academics from Israel signed a European petition calling for the severance of scientific and cultural connections with Israel."

As Kney-Tal sees it, Israel has no choice but to "draw Europe into a serious, genuine dialogue, one which will deal not only with ongoing events, but also with deeper levels. That's what is really lacking. Our relations with Europe are asymmetrical, due to our small size and their large one. This asymmetry has to be converted into a different sort of cooperation, one unlike what we have had up to now. We must initiate this; we need to sharpen the messages, and reach understandings based on shared interests in security and democracy."

“IS MIDDLE EASTERN TERRORISM SUBSIDIZED BY EU AID MONEY”

With unyielding faith (sequel to "Arafat Bombs, Europe Pays")
By Thomas Kleine-Brockhoff
Translated from German from Die Zeit
August 15, 2002

(This is the longer online version. An abridged version appeared in print)

Is Middle Eastern terrorism subsidized by EU aid money? A view from the frontlines of a static war between the Israelis and the Europeans.

The murder took place while the Bloombergs were on their way home from the stationery store. They have five school-age children. It is August 5, 2001, a hot day in the Middle East. The drive from Kfar Sava to the village of Karnei Shomron takes about 40 minutes. The back road winds through the hills above Tel Aviv. Three cars drive close behind one another. The Bloombergs are in the middle one. Near the village of Azun, the Bloombergs pass a slow-moving car. Suddenly its window opens and someone fires and hits the driver of the second car. That was Stephen Bloomberg. He was seriously injured, as was his 14-year-old daughter Tzippi. His wife Techiya, 40-year-old and five months pregnant, didn't survive the drive home.

A year later, Stephen Bloomberg, or Shimon as he is called in Israel, is confined to a wheelchair. He continues to live in Karnei Shomron with his children, whom he has to take care of by himself. He still drives the highway toward Tel Aviv three times a week. He returned to work as an aircraft engineer, but only part time on a count of his children and his disability. His telephone voice is firm He is a man who believes in fate. You can't waste your life trying to avoid danger, he says.

Bloomberg immigrated from England, lived in the city at first, got married and finally decided 12 years ago to escape the crowds and buy himself a single-family home. So he moved his family to Karnei Shomron and became a settler. The land "was empty when the village was established, we didn't displace any Palestinians" he said. It sounded like an excuse for his decision. On the other hand he also came because he read about this piece of land – "Judea and Samaria" – in the Bible. So Bloomberg, in turns both fully aware and terribly naive, settled into the middle this bloody war, which long ago ceased to distinguish between combatants and civilians, between Israel and the occupied territories. Bloomberg is a victim of the violence, one of thousands on both sides, but one whose name will stand out, at least in Europe.

Stephen Bloomberg has filed suit in a Tel Aviv district court. He's demanding 20 million Euros in damages, not from the shooters, nor their operators, but from the European Union. His lawyers argue that the EU is negligent in that it transfers 10 million Euros a month in budgetary assistance to Yassir Arafat's Palestinian Authority. The Israeli government, his lawyers argue, has repeatedly warned that it believes direct payments could be diverted to pay for terrorism. Documents containing proof have been turned over. The EU knows all about it, but closes its eyes, says attorney Nitsana Darshan-Leitner.

Israeli agents suspect two Palestinians in the fatal attack on the Bloombergs. Both are in custody, but haven't been charged yet. The purported shooter is a man by the name of Farid Azouni. Samar Abu Hania gave the order. The former is a policeman, the latter is the chief of police in Qalqilia. Both are civil servants. They draw part of their salaries from the very Palestinian budget that Europe subsidizes every month. Stephen Bloomberg considers this unacceptable. "My parents pay taxes in England and look on as their money goes to sponsor an organization that helped kill my wife and injure my child and me."

This fall the case of EU aid for Arafat will probably end up in court. The EU has addressed the matter curtly and unequivocally: It has seen "no evidence" for the allegations. That has become the European refrain. They've been repeating it since the Israeli government first published documents confiscated from Yassir Arafat this spring which allege misuse of European aid funds (Die Zeit24/2002 [translated here])

EU External Relations Commissioner Chris Patten disputes all of the allegations in the strongest terms. Standing before the European Parliament Foreign Affairs Committee on June 19 he said that the EU Commission had "painstakingly examined" all of the Israeli government's documents. They found "no proof, I repeat, no proof that European aid funds were used for anything other than their intended purpose". Patten refers to an old report from the days of the peace process, according to which the EU has implemented "the most comprehensive and intrusive oversight system" of any comparable situation in the post-war era.

Patten denied the Israeli charges in his long parliamentary address, but didn't refute them in detail. Until today there has been no comprehensive public examination of how Israel and the EU could reach such different conclusions from the same facts. To that end, Die Zeit has recently examined all of the official PA files that Israel presented to the EU in June. It has spoken and corresponded with experts from both sides and has interviewed Palestinian professionals at length. All sides have provided comprehensive information, while the Palestinian experts would not agree to be quoted, not even on condition of anonymity. (All of the documents sourced in this article are available on the Die Zeit website [at this link]) What emerges is a picture of bitter static warfare. Neither side will budge, but the EU's position has come under heavy fire.

The documents in question are sitting in an Israeli army hangar. A lone journalist, Ronen Bergman, was apparently the first to see the originals and he reported in the daily newspaper Yediot Aharonot on July 12 about enormous mountains of paper, towers of cardboard boxes and stacks of filing cabinets, being sorted through by reservists and Arabic translators. The institutional memory of the Palestinian Authority lies within, confiscated by the occupation army from Arafat's headquarters, the Mukata; as well as from administrative offices throughout the West Bank. At first the Palestinians claimed that the documents were forgeries. Then they claimed that their contents were irrelevant. Since then they've asked for the documents to be returned. The EU disputes neither the authenticity of the documents, nor their translation from Arabic, but only their interpretation. For example, the Israeli conclusions of the story about the attack in Hadera on January 17, 2002

That evening Nina Kardashova, age 12, celebrated her Bat-Mitzva, her debut as an adult in the Jewish faith. Her family organized a party. 180 guests came to the event hall in Hadera. Someone happened to capture the events of 11pm on videotape. The scene was later shown on Channel 2. A man came in the through the entrance. The guests had their backs turned, many were dancing. The man pulled a gun out from underneath his coat, an M16. Before the tape broke off, one could see for an eternal second how the man kept firing into the crowd. The cameraman threw himself on top of the dancing Bat Mitzvah girl, in order to shield her. Someone threw a chair at the gunman. Apparently as he was trying to reload, the gunman was attacked and shot. Six people were killed.

The gunman was identified as Abed Al Salem Hasuna. Israeli police also determined who recruited the murderer, gave him the weapon and about 100 Euros of spending money, and who arranged the transportation to Hadera and recorded the confession video as well as informed the media after the event. That man was arrested on April 8, 2002 and charged with multiple murders in July 2002 in Tel Aviv. According to the indictment, the man's name is Nasser Awis. He allegedly planned three attacks that left a total of 20 dead and 120 injured.

Nasser Awis, age 32, comes from the Balata refugee camp near Nablus. He is a member of Arafat's Fatah movement and is northern West Bank district chief of its military wing, the Al-Aqsa Martyr's Brigade, which took credit for the Hadera attack. The investigation revealed that Awis is employed as a public servant in the Palestinian Authority. As an officer in the General Intelligence, one of the security services, he's supposed to be fighting terrorism and preventing anarchy. That is why part of his civil servant's salary is paid for by European taxes.

The Nasser Awis case appears in an Israeli document with the title "The Palestinian Authority Employs Fatah Activists Involved in Terrorism and Suicide Attacks" [Document #2 at this link]. This tome has been presented to the European Union. Nevertheless the EU Commission wrote in its assessment: "There is no evidence that any person involved in terrorist acts has actually been recruited into the PA security services". Didn't the EU consider the Awis case? In an interview, an EU diplomat in Jerusalem was not as uncompromising as the Commission. Couldn't Awis simply have been an unstable individual who was moonlighting as a terrorist? That was certainly possible. The EU can't be ultimately responsible for the mental health of every Palestinian civil servant, when all it does is subsidize the PA's budget. Could this have been an isolated incident?

Then what about the case of Marwan Zallum, included in the same documents that the Israelis presented to the Europeans. He is member of the anti-terror special forces, but similarly listed in Israel's investigation findings as a terrorist.

And the case of Samar Abu Hania, the police chief who ordered Techiya Bloomberg's murder?

And what about suicide bomber Mohammad Hashaikh, a policeman from Nablus whose case was portrayed in the earlier Die Zeit article?

And what about Abdel Karim Abu Nafa, a policeman from Jericho, whose suicide attack was mentioned in an article in Foreign Affairs?

All civil servants, all subsidized by Europe, all isolated incidents. How many isolated incidents does it take to form a pattern?

Europe's diplomats in the Holy Land argue as follows: Everywhere in the world there are policemen who misuse their service weapons and their authority. What counts is how strictly the security apparatus acts against criminals from its own ranks. To that the EU Commission writes: "If any evidence comes to light that the PA is knowingly employing members of terrorist organizations, the PA will need to act immediately to take these people off the payroll and bring them to justice. The EU will not accept that funds fall into the hands of terrorist organisations."

But how does the Palestinian security apparatus actually respond to reports of murder by state officials? A document from Tulkarm contains that information and it has been presented to the EU. It is a report from February 6, 2002 by a civil-servant named Hamdi al-Daruch, who is a regional chief in the security service, and who is subsidized by EU tax funds. The report is regarding the "General Situation Among Armed Fatah Members in the District", that is to say the Al-Aqsa Martyr Brigades. The report is aimed at another one of the European funded salarymen, security chief and Arafat-confidante Tawfiq Tirawi. It estimates that there are "between 15 - 20 armed Fatah men" divided into three squads. At least one of these squads is difficult to control, the writer complains. In some cases there was "a complete breakdown of relations" between the "arms bearers" and the security apparatuses. There is no longer any joint work with them. All this "at a time", he complains, "when the concept developed whereby the arms bearers of the Fatah constitute first and foremost a support for the Palestinian Authority and its security apparatuses". The bureaucrat proposes a remedy: "It is necessary to remove some of the parasites who mixed in with the arms bearers and those who did not fire one bullet at Israelis in order to discard their financial burden"

There are no problems with other units, the security chief reports. The best squad is "very active" and "maintains with us continuous coordination and contacts". It operates on "bypass roads and even in the depth of Israel". It conducts "high quality successful attacks", most recently the "coordination and planning of the operation in Hadera" Even the name of the operative fingered by Israel, Nasser Awis, shows up in the document. [The complete report appears in Die Zeit's Document 2, appendix B]

Here the evidence indicts not just a lone Bat-Mitzvah terrorist, but an entire organization. Everyone involved within Arafat's circle are officials and draw part of their salaries from Europe. They're not stopping terrorism, they're bragging about it. This explains the cooperation between the Al-Aqsa Martyrs and the PA. Are we talking here about what the EU views as an institutional isolated incident?

On June 17, 2002 the EU declared the Al Aqsa Martyrs Brigades to be a terrorist organization, months after the Americans did so. If it is serious about drying up its financial sources, it could start by finding out how many of its cadres are actually Palestinian government employees, whose wages are subsidized by Brussels. It would be worth their while, claim the Israelis.

Exactly how many, the Israeli military isn't sure. Sometimes they write of "a hundred" sometimes of "hundreds" of members of various Fatah militias that similarly receive European-subsidized salaries for their service in the security forces. They believe they have figured out the system. Arafat and his people have methodically built a small shadow army, that has no ostensible connection to the Palestinian Authority, the Israelis say. The claim is that the PA has recruited specific militants out of its own employment rolls, or otherwise nurtured them – and in any event using European money.

And this where begins that part of the story that the Israelis don't like to tell. One hears it, for example, from military officers when the official interview is over. The Fatah militias were apparently formed years ago and the experts in Jerusalem knew all about it. But they kept silent. Why?

The rationale comes from David Makovsky, a historian of the peace process (Making Peace with the PLO). He writes in the Washington Post, that after the Oslo Agreement of 1993 Israel considered Palestinian internal affairs to be diplomatically irrelevant. "Because Yassir Arafat was seen as the source of Palestinian legitimacy, his authoritarianism wasn't just part of the deal, but was welcomed outright" Makovsky offers. "Everyone believed that an Arafat with unrestrained power could do more for Israel's security". Therefore the formation of loyal Fatah militias and its integration into the state structure was seen as an appropriate tool against the growing popularity of the radicals from Hamas and Islamic Jihad. Only after these militias started aiming their weapons at Israelis during the Intifada, say analysts in Jerusalem, did Israel sound the alarms with the western financiers of Arafat's administration. Yet the EU wasn't convinced that there had been a marriage between Arafat's PA and the militants of the Fatah movement.

At the center of Israel's investigation stands Fatah functionary and Arafat-confidante Marwan Barghouti, chief of the Tanzim militia in the West Bank. He has been in Israeli custody since April 2002 and is accused of being the commander of the Al-Aqsa Martyrs. He has not yet been indicted [he was formally indicted shortly before this article went to press -SMS] Israeli troops found checks and checkbooks in his office. He apparently used them to make payments to Fatah groups and Fatah members who were later implicated in terror attacks. The Israelis found 70 such money transfers and forwarded several copies to the Europeans. It's important to understand where he got the money to pay for the military infrastructure. Barghouti always drew from account number 01810058/4 at the Ramallah branch of the Bank of Jordan. That is the salary account of the Palestinian Ministry of Finance. This is the agency that receives the European aid funds.

The EU Commission doesn't dispute the fact that Barghouti could avail himself of civil service salary funds. But they write that the exhibited checks were "dating from 1998-99", i.e. before the EU provided budgetary assistance, which began in June 2001. Remarkable. Didn't the EU look closely at the Israeli documents? If they had, they would have found, on page 52, a money order from October 2001, precisely during the time when the EU was funding the PA's salary account.

In response an EU diplomat in Jerusalem says: a single money transfer order from the time of the Intifada is not credible evidence for indirect financing of the Intifada out of public funds. They asked the Israelis for additional evidence. None was forthcoming. The Israelis probably couldn't deliver it, because in April 2000 EU pressure worked and the PA finally established an integrated account for the Finance Ministry, the EU claims. Barghouti's method of indirect financing was no longer possible.

That sounds satisfactory. In fact, the Israelis have no evidence in its place. Yet assume that the Europeans are right. Is it then reassuring if Arafat's authority had previously funded militant Fatah groups using indirect means before the Intifada started and the EU implemented direct assistance? Shouldn't this raise red flags at the EU Commission? What would have to happen before suspicions are aroused?

All questions ultimately lead to Yassir Arafat. As the Israelis interpret the documents, Arafat appears as Lord of the Night, as an omnipotent head terrorist. The underlying assumption is that he is incontrovertibly evil. But if one interprets the documents with less prejudice it is still alarming what one reads in them. They provide, among other things, evidence of Arafat's loss of control. He appears as someone who is driven to curry favor with the warlords and the militants so he doesn't lose out to the Islamic competition. And therein lies the problem.

But so far no piece of paper has surfaced that shows Arafat's signature ordering an attack. And nobody expects to find one. It's more complicated than that. The Palestinian leader comes across in the documents as an old-fashioned micro-manager. Every expense larger than 250 Euro comes across his desk to be signed. That may be impractical and inconvenient but it ensures that Arafat is kept informed, like a village mayor, about every detail – even details of which the EU wished he remained ignorant.

Israel has shown the EU various documents that were addressed to Arafat. For example on May 15, 2001 twelve "activists in the blessed intifada" were recommended to him as "the best of the fighting brothers" who are "wanted by the occupation authorities because of their deeds". The Honorable President, may God protect you, should approve the employment of the brothers. The process of nationalizing the terrorism thereby reaches the president's desk. But Arafat didn't sign. Why not? Because he isn't amenable? Or because he knows that this signature could cost him his monthly millions from Europe. Arafat assigns the list to be processed by a senior aide. Months later, on August 6, 2001, the list is faxed to the chief of Special Forces. He is apparently supposed to employ the fighting brothers. Whether that happened is unproven. The International Criminal Court will not bring an indictment against Arafat on the basis of these documents. But this type of administrative camouflage can be appropriately judged in a political context.

And how does the EU respond to these ideas for creative use for its millions? It writes that Israeli documents provide, once more, "no evidence" for the deliberate recruiting of terrorists into the security services. Arafat has forwarded hiring recommendations in 134 cases without conveying specific instructions. "Any effective approval by Arafat for these recruitments would have required him to add the standard 'to hire' or similar instruction to his signature", writes the EU.

Whoever accepts this argument would have to view Arafat as a bulwark against terrorism. Accordingly his own people would be building militias, on behalf of which they petition the PA president's European-filled coffers, while Arafat himself imposes superbly moderating influence against the war strategy of his own apparatchiks.

This view of Arafat is borne of an unyielding faith in his goodness. The EU cries "no proof!" yet generously disregards the plethora of direct and circumstancial evidence. The EU is acting like the wife who assiduously overlooks the stranger's lipstick on her husband's collar and doesn't believe that she's been betrayed until there's a private detective with an incriminating videotape standing at the door.

The Israelis have tried to calculate in Euros what they consider to be the extent of the fraud. They claim that the Palestinians have used "money laundering techniques", such as keeping two sets of books and managing a shadow budget. 14% of the aid, the Israelis say, was diverted. The most important technique, in Israel's estimation, is a foreign currency trick. The PA's international aid arrives in Euros and dollars and is converted into Shekels. The PA employees receive their salary in shekels, at a fixed and dramatically lowered exchanged rate. The PA pockets the rest. Because the Shekel is constantly being devalued, the PA can hold the rest of the funds – most recently nearly $8 million a month.

The EU-Commission doesn't dispute that the PA is using an unrealistic exchange rate. It is, the EU writes, an "old condition imposed by international donors", that has since been retracted in cooperation with the new reformist Finance Minister, Salam Fayad. The EU is unconvinced that the foreign exchange profits were used to manipulate the budget. They argue as follows: With the outbreak of the Intifada, Palestinian tax revenues had been withheld. The import taxes and customs duties that were levied on behalf of the Palestinians (e.g. at ports) had been held back by Israel, in violation of the agreements. Therefore the PA found itself in a liquidity crisis. Its remaining revenues were insufficient to pay its employees' salaries.That's why the EU helps out each month. And with the exchange rate profits, the PA could now pay "three salaries when before there was only enough for two and a half".

This actually seems to be the weakest link in Israel's chain of evidence. The exhibited documents don't quite support the far-reaching conclusions. The Israelis had to play them up to make them convincing. In the meantime the magnitude of the redirected aid funds is unclear. That weakens the argument, but it is beyond dispute in principle. Curiously that is the only point of accord in the static war between the Europeans and Israelis.

The Israelis have found documents which show that Palestinian security officials pay a mandatory deduction from their European-subsidied wages, in the amount of 1-2% of their salary. These are membership dues in the Fatah movement. The EU Commission doesn't dispute this. They don't see anything wrong with it. Because, they write, "Fatah is the majority party in the democratically elected Palestinian parliament." The deductions are "not dissimilar to the mandatory deductions from salaries for trade union members' fees in some EU countries". Here the European argument is, perhaps unintentionally, cynical. None of the European labor unions are known to be under suspicion for financing a military wing that conducts deadly bombings.

The whole dispute stands larger-than-life like a symbol of mutual misunderstanding in this bloody phase of the eternal Middleeastern conflict. Europe's diplomats feel they've been put on the defensive by a roughshod campaign. They say the Israelis aren't dealing with the facts. They are only trying to legitimize the uncompromising policies of the hardline prime minister Ariel Sharon. The Europeans therefore won't change their position in order to prevent the West Bank from falling into anarchy. The Israelis say that the truth is the other way around. The Europeans, they say, don't care about the facts. "They won't let the facts interfere with their political views", said one general, who analyzed the files. The Europeans simply won't let themselves abandon Arafat. One hears the same argument from the left. "You need to build a concrete wall between the Europeans and Yassir Arafat" said Benjamin Ben Eliezer, Defense Minister and head of the Labor Party. And diplomats working for the moderate Foreign Minister Shimon Peres write that the EU Commission apparently sees Arafat's PA as a law-abiding administration of a Westminster democracy: "Whoever paints such a picture is at best naive, and at worst deluded".

Independent voices in this dispute are rare. On July 18 the first policy brief on the use of aid money appeared, from the Washington Institute for Near East Policy. The author is Matthew A Levitt, a former FBI investigator, who now researches the financing of terrorism. His summary says: "No specific Euro can be traced to the purchase of a specific bullet". But that's not even necessary. The PA's financial support for terrorism has been "well documented". Europe's decision makers should therefore be "increasingly concerned and embarrassed". Despite "repeated denials" of the EU Commission the problem remains that "there is no complete, publicly available accounting of how the PA spends its money – including the cash it gets from the EU".

Naturally, Europe should have had a debate about Arafat's aid money long ago. Has it failed? Does it serve peace? Does it support or prevent democratic reforms? Does it make sense to concentrate on Arafat and his "Tunis-clique" Should Arafat even be given cash? Do humanitarian projects alone have a future? Such questions serve the discussion, because there is no end in sight for European aid to Palestine. If it ever came to actually establishing a state, Europe would have to play a role. Every peace arrangement would require substantial aid packages. Both the Americans and the Israelis would demand them from Europe – provided they cannot be diverted for other purposes.

Instead of a debate, Europe has Chris Patten. He now seems to want to solve the problems that he constantly said didn't exist, with the motto "Everything was fine until now, in the future we'll make it even better". Patten naturally knows how bold he was being when he wrote the EU foreign ministers on May 7 that there were "stringent ex-post control mechanisms" for the EU direct aid. Whatever these mechanisms might have been, they were not strong, strict or stringent.

There is only the IMF, the International Monetary Fund. It provides technical assistance to the PA, assists with assembling the budgets and checks the so-called budget execution. It looks at the essentials of compliance with budget planning and whether sums are booked correctly. The IMF doesn't monitor how funds are actually used. That would be an accounting and managerial audit. That's not part of the IMF's mandate. What this means is, where the European budgetary assistance actually goes has never been subject to an independent audit.

Chris Patten is now pressing the Palestinians to make all their finances transparent and to establish an independent state comptroller. In fact there already is one, but it's not independent, as the Los Angeles Times reported on July 14. The newspaper's correspondent visited with the director of the agency. His name is Jarar Kidwa and is a dead ringer for Yassir Arafat. Which is no surprise, since the two are cousins.

Kidwa reports that he had recently called his cousin. "I said to Arafat: 'let me do this. I'll clean up the whole administration.' but Arafat stayed silent. Kidwa published the first corruption report of the Palestinian Authority in May 1998. It indicated how officials misused public funds. The report created such an uproar that Arafat prevented any additional publications. But Kidwa kept looking for fraud and mismanagement. Yet he could never examine certain investments, the security services and Arafat's office. Each year, only one man may see his report. "Our enemies could use this report against us," Kidwa said, "So I only give it to the President."

On the day after this article appeared in the Los Angeles Times Chris Patten wrote the PA and made the independence of Palestine's top financial controller a condition of future EU aid. Jarar Kidwa can now test the limits of his new freedom. As of last week he has the assignment to examine the expenditures of the security services during 2001.

Supporting documents referenced in the article are also available (in English) from Die Zeit online at this page The documents available for download at that page are as follows:

Documents 1 - 3: Compiled by Israeli military intelligence from Palestinian documents that were captured from PA offices in the West Bank in the spring of 2002. These documents implicate the PA in terror attacks carried out by the Fatah Tanzim militia and Al-Aqsa Martyrs Brigades.

Document 4: In June 2002 The EU dismissed Israeli allegations as unsubstantiated. For the first time the EU addresses these issues in detail by answering a set of questions posed by Die Zeit on July 26, 2002.

Document 5: Questions posed by Die Zeit to the Israeli governemtn to address the European responses in Document 4.